Tuesday, January 10, 2017

Gold should go much higher in 2017 as short covering indicator has always led to rise in price

In this era where nearly everything in the financial system it rigged, manipulated, or controlled by a central bank, common indicators like fundamentals and technicals no longer are of much value when determining what direction an asset will go.

In fact, besides controlling the currency and bond markets through the massaging of interest rates, the equity markets are managed by an entity known as the Exchange Stabilization Fund, and the commodities are rigged through paper contracts in the futures markets.

So when doing one's research on what should be profitable to invest in, it is the direction of the manipulation that is most important, not the data provided on a company's balance sheet.

Ie... Don't Fight the Fed.

Yet with that being said, one of the 'new normal' indicators tied to gold is suddenly rearing its head, and historically has always led to higher prices in every given cycle.

And what is that indicator?  Short covering in the paper gold markets.

But the biggest indicator that gold sentiment is improving is the falling volume of short bets… 
You see, investors are starting to sell their shorts on gold stocks. One of these is NovaGold Resources Inc. (NYSEMKT: NG), a $1.5 billion gold mining firm whose number of short positions fell 3.8% from 13 million to 12.5 million between November 2016 and December 2016. 
The improving sentiment is also clear from the recent performance of the Gold Bugs Short Index (HUISH). This index tracks the short positions on gold miners that don't hedge their long-term gold production based on gold price movements. It's down 12% in the last month, indicating that short interest in gold companies is falling as well. – Money Morning
Following Donald Trump's victory in the November Presidential election, bullion banks crushed the gold price by dumping nearly three years of global mining output onto the futures markets in just three days.  But after this initial slam, using naked shorts to manipulate the price, these same banks began to cover previous short positions at lower levels and have since continued the process of covering many of their bets.

Gold has moved higher since the start of the new year, and has even begun to disconnect from the dollar as the price has moved higher even on days when the dollar has strengthened.  And as noted in the first paragraph of this article, old indicators no longer work when markets are dictated by the actions of those who manipulate and rig the markets.

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